Standing Committee A

[Mrs. Joan Humblein the Chair]

Clauses 46 to 50 ordered to stand part of the Bill.

Clause 51

Applications for certificates

Martin Horwood: I beg to move amendment No. 146, in clause 51, page 58, line 14, at end insert
‘although not in a form that might reasonably discourage legitimate applications,’.

Joan Humble: With this it will be convenient to discuss the following amendments: No. 138, in clause 51, page 58, line 18, at end insert
‘, and
(d) must include provision to combine the processes for registration and application for a certificate.’.
No. 147, in clause 52, page 58, line 37, at end insert—
‘(4A) Conditions under subsection (4) must not be in a form that might reasonably discourage legitimate applications.’.
No. 139, in clause 53, page 59, line 21, leave out paragraph (e).
No. 148, in clause 53, page 59, line 23, leave out from ‘inadequate,’ to end of line 24 and insert
‘having regard to all circumstances.’.
No. 142, in clause 53, page 59, line 35, leave out
‘or any person authorised by him’.
No. 141, in clause 53, page 60, line 9, leave out sub-paragraph (i).
No. 149, in clause 57, page 63, line 31, leave out subsection (4).

Martin Horwood: How good it is, Mrs. Humble, to see you back in your regulatory function.
How topical can we be? I struggled last week to find a newspaper story relevant to our deliberations, but we are now discussing fundraising and the newspapers have pages on the subject. I am sure that it would be a good idea for political parties to follow the rules and self-regulation that we are discussing today in the context of charities.
Amendment Nos. 146 and 147, which are similar, relate to the way in which the Charity Commission may apply additional regulations and conditions relating to the issuing of public collections certificates. We completely support the process of issuing national certificates; it seems a good and sensible way to tackle the broader spread of public collections that the Bill puts under the commission’s remit. However, I am concerned that the commission should not get carried away when imposing those regulations or conditions.
We have discussed a number of times the risk that regulations and other provisions might be rather onerous for some charities. In my experience, large organisations would not have much of a problem with the presumably well-intentioned conditions and regulations that might relate to public collection certificates, because they tend to have professional fundraising teams with the time and expertise to look into such matters; indeed, if they are wise—or unwise—the charities might even employ fundraising consultants. The risk is that smaller or middle-sized charities might find it a little difficult; when presented with the regulations, they may begin to think that the exercise is not worth while.

Andrew Turner: The hon. Gentleman said that they might employ professional consultants to look into the regulations if they were “wise or unwise.” Does he think it would be wise, or unwise?

Martin Horwood: It depends on the consultant.
The risk is to the middling or smaller charities. Reports by the National Council for Voluntary Organisations and the Charities Aid Foundation regularly identify the trend for increasing amounts of income in some sectors to go to the largest charities. There is a distinct squeeze on the middling and smaller organisations which affects their income and their ability to run things like national flag days or national collections. The amendments are designed to counter that squeeze a little and avoid the risk of our adding inadvertently to the pressure on those middling and smaller sized charities.
Amendment No. 148 is similar in intent to amendment No. 139 tabled by the hon. Member for Bishop Auckland (Helen Goodman). Her proposal would delete subsection (1)(e) from clause 53, which gives grounds to the commission to refuse a certificate if it
“appears to the Commission that the amount likely to be applied for charitable, benevolent or philanthropic purposes in consequence of the proposed collections would be inadequate”.
We want to delete from the subsection the words
“having regard to the likely amount of the proceeds of the collection”
and substitute them with
“having regard to all the circumstances”
from the following subsection that refers to remuneration. We tabled the amendment because there were several doubts about whether the Charity Commission could properly judge the likely proceeds of the collections.
The amendment tabled by the hon. Member for Bishop Auckland is braver than our amendment and would remove the provision entirely. On reflection, perhaps that is the simpler and more direct approach. It has a lot to commend it. I would be content if either amendment were accepted. If the hon. Lady wishes to press her amendment to a Division, I might withdraw my amendment.

The problem with the clause is threefold. Is it even a legitimate ground on which to challenge the issuing of a certificate for a public collection? [Interruption.]

Joan Humble: Order. I remind the hon. Gentleman and, indeed, all members of the Committee that they should switch off electronic devices before they come into Committee.

Martin Horwood: That was an extremely timely reminder.
The first problem with the clause is the worry that the idea of refusing a certificate on the grounds of the likely proceeds is legitimate. There is no suggestion in the following subsection that fees would outweigh the benefits of the proceeds. It is simply that the charity would not raise as much money as it thought it would. That is the only issue that is relevant to subsection (e). If the charity was employing paid fundraisers it might lose money from the collection and presumably would not want to do it again in those circumstances or at least be disappointed and not want to proceed. It is difficult to see what else the consequences of being allowed to proceed with a collection in such circumstances would be. The Minister is frowning. Perhaps he has an idea of the circumstances.

Edward Miliband: The circumstances might be when the proportion raised for the charity is an extremely small amount of the total proportion raised and most of it ends up going to the fundraiser. Subsection (1)(e) is making that judgment.

Martin Horwood: I am grateful to the Minister, but I do not think that he is right. That situation is addressed by subsection (1)(f), which refers to the
“amount by way of remuneration”
that
“would be excessive, having regard to all the circumstances”.
In other words, it would include the likely proceeds of the collection. The Minister is nodding. Perhaps he would like to intervene.

Edward Miliband: I am actually shaking my head. For the benefit of the Committee, I shall read out the provision. It states:
“that it appears to the Commission that the amount likely to be applied for charitable, benevolent or philanthropic purposes in consequence of the proposed collections would be inadequate, having regard to the likely amount of the proceeds of the collections”.
That is about the proportion being applied for charitable, benevolent or philanthropic purposes relative to the amount not being applied for those purposes.

Martin Horwood: I still think that the Minister is wrong; the proceeds, not the proportion, are referred to. In such circumstances, surely the only possible significant cost not being applied for benevolent or charitable purposes—apart from having particularly extravagant collecting tins—would be the remuneration paid to the fundraisers. However, that issue is tackled by 53(1)(f), which talks about balancing remuneration against all the circumstances. That is precisely my point: there are very few circumstances in which one can imagine anything detracting from the donation concerned.
Under either existing charity law or the Bill, any significant proportion being given to some other place would have to be declared at the point of solicitation in any case. As I said, other than the charity simply not raising as much money as it thought it would, it is difficult to see the consequence of issuing a certificate in such circumstances. In most reasonable organisations, the budget heads would be separate in any case; in most cases, 100 per cent. of the money from all public collections would be applied to charitable purposes because it would go into the charity’s accounts. It is very rare indeed for any kind of commission to be taken out en route. Commission is dealt with in paragraph (f); what other costs might there be against the charitable proceeds? Will the Parliamentary Secretary enlighten us?
The second problem with the clause is the word “inadequate”. How will the Charity Commission be able to judge what amount would be inadequate for charitable, benevolent or philanthropic purposes? Payroll-giving collections are often done in workplaces. I am not certain about whether they would be covered, but the point is relevant. In payroll giving, the cost is paid relatively up front and the proceeds only come in on a monthly basis over a long period. In the short term, the costs will almost certainly outweigh the proceeds.
In those circumstances, would the Charity Commission think the proceeds inadequate? Perhaps it might, but in my experience, payroll giving, over time, is one of the most cost-effective forms of fundraising, in common with other forms of fundraising that encourage regular donations over a long time. Henley management centre, which did a calculation of lifetime value, said that if we imagine that the average lifetime value of standing orders generated by face-to-face fundraising was something like £350 to the charity, the overall payback ratio generally achieved was something like 5:1, an extraordinarily good return on the charity’s investment in that fundraising. However, at the moment of solicitation, the fees or remuneration paid might outweigh the immediate proceeds. Indeed, that is quite plausible, as some donors might cancel or not pursue the standing order for very long.
Such issues are difficult. As I know to my cost, it is difficult enough for fundraisers to judge when the proceeds are adequate; it is even more difficult for charity trustees and generalists within the charity to judge, and impossible for the commission to judge in any reasonable way whether the proceeds would be adequate.
The last problem is even more basic: how on earth is the commission to judge the likely amount of the proceeds before the collection happens? If the certificate is being issued for the first time, there is no rational basis on which that could be judged. A lot of fundraising is based on sucking it and seeing—on testing out a particular approach, creative line, presentation of the charity’s case or appeal topic. Until such things were tested, we would not know what the proceeds were likely to be.
There is a multitude of problems with the clause. As I said, I would be content for the amendment tabled by the hon. Member for Bishop Auckland to pass; if it did not, I should want my amendment No. 148 to be passed.
Amendment No. 149 is a probing amendment that would remove clause 57(4). That provision gives the Attorney-General the right to interfere in the deliberations of the tribunal on public collections, but I do not understand why there should be such a right. We have discussed the Attorney-General’s role in other circumstances as being in the interests of beneficiaries, but I am not sure in whose interests it would be were he to interfere in the decision to issue a certificate on a public fundraising collection. The beneficiaries’ interests would not be directly relevant at that point. Perhaps the Minister can give an example.
The group also includes two further proposals from the hon. Member for Bishop Auckland—she has been an active and worthwhile member of the Committee and has produced some excellent amendments. Amendment No. 138 is particularly excellent—I wish that we had thought of it. It applies to clause 51 and takes a fundamentally deregulatory approach. The hon. Lady seeks to combine the process by which people register for the commission and apply for a public collection certificate. Clearly, not everyone would want to do that. There are some trusts that would never contemplate a public collection because they are funded by endowment, and there are charities that would only ever wish to undertake small-scale or local collections—charities which would be exempt from these clauses. For charities that are big enough to aspire to a national certificate, however, the amendment seems extremely sensible.
The hon. Lady has also tabled amendments Nos. 142 and 141. One is very important; the other seems to me to be quite unwise, although the hon. Lady may instruct me otherwise. Amendment No. 142 refers to what I believe is quite a serious mistake in the Bill’s phraseology, though perhaps it is a drafting error. The relevant provision concerns the right of the commission to refuse a public certificate on the grounds that there have been breaches of conditions on previous certificates.
At present, clause 53(1)(i) refers not only to circumstances in which
“it appears to the Commission that the applicant”—
the charity or the person applying—
“has breached any conditions attached to a previous public collections certificate”.
It also refers to circumstances in which
“any person authorised by him”
has ever done that.
Let us take the case of a legitimate national charity such as Christian Aid, which has a huge collection that involves many thousands of collectors. It may inadvertently take on a local fundraiser—let’s call him Michael—whose ideas for collecting were not very legitimate. Perhaps he offered rewards for donations, or suggested that donations be converted into loans, or something like that. That would clearly not be within the rules of Christian Aid collections, and quite possibly it would have be a breach of the certificate. It would be quite right for Christian Aid not to employ that person as a fundraiser again, nor use his services as a volunteer. However, the clause would allow the Charity Commission to use that person’s conduct as a basis on which to refuse Christian Aid a public collection certificate for Christian Aid week.
In practice, Christian Aid would never be denied a certificate on such grounds, because it is one of those big, well-resourced national charities that would be able to argue its case effectively and would never really be at risk. However, the provision presents much more risk to a smaller and less sophisticated charity which might not be able to argue its case so well and in which an individual collector would be more significant.
I am not sure that deleting the provision is quite the right approach. The clause appears to have a legitimate intent—to extend the commission’s power to refuse a certificate not just to a charity as a whole but to someone continually employed by the charity who breaches the certificate’s terms with the charity’s knowledge. It is legitimate for the Bill to address that, but the clause as drafted does not do it well. It opens up the possibility of serious abuse.
I move to Amendment No. 141, tabled by the hon. Member for Bishop Auckland. Currently, the commission may withhold a certificate if it is not satisfied that the charity has acted with due diligence
“to secure that persons authorised by the applicant to act as collectors...were”
or are
“fit and proper persons”.
That is a sensible and important power for the commission to have. I am puzzled by the hon. Lady’s amendment, and seek her clarification.

Helen Goodman: May I say what a pleasure it is to see you in the Chair again, Mrs. Humble?
The section on public collection certificates is obviously designed to even out administration throughout the country of collections by charities. I understand the problems that it is intended to address. However, its drafting risks making the process extremely bureaucratic and inefficient, and my amendments drive at that possibility. It must be efficient and impose a minimal burden on both charities, so that they need not spend a lot of time on it, and the Charity Commission, which as we have learned will not receive a vast injection of resources to perform its new functions.
Amendment No. 138 suggests that we pull together the two processes. I checked with the Charity Commission yesterday to find out the situation on annual returns. It told me that every year, it writes to all charities with an income under £10,000 to check that they still exist. Then it has different forms depending on whether a charity’s income is between £10,000 and £250,000, between £250,000 and £1 million or more than £1 million. The forms are quite long—between 12 and 22 pages, although most of that concerns the information that the commission is seeking about trustees.
I am making two simple suggestions: the request for a public collection certificate should be added at the back of the form, so that nobody has to get involved in two processes that they could easily forget, and the information on both processes should be kept together. 
My amendment No. 140 to delete clause 55 is not on the order paper, but I would like to explain here and now why I proposed it, in order to save time. Clause 55 is designed to provide a separate process if a charity’s trustees change. Although the public collection certificate lasts for five years, a charity will need a new certificate if its trustees change.
As we all know, the trustees of medium and large charities do change. They are regularly turned over. Every year, there probably someone new involved in a large charity. Rather than having another process which will mean that the public collection certificates do not last for five years but in practice for only one year, we can cut out an entire clause and an administrative process—given that charities do say who their new trustees are in the annual return—by wrapping up the two processes together.

Andrew Turner: That sounds an enticing prospect. However, would the hon. Lady tell me if the form on which one notifies changes of trustees is retrospective or is one required to notify a change of trustees at the time it takes place? If so, would the public collection certificate have expired by virtue of the change of trusteeship before the notification was received by the commission?

Helen Goodman: As drafted here, the public collection certificate would be invalid if the trustees had changed. As the hon. Member said, the annual return is one in which what has happened in the previous year is reported. That degree of propriety is not one that we could operate in practice. Therefore I am suggesting that it is run in a different way and that a subsequent change would be reported and regarded by the Charity Commission as adequate.
I am concerned that the administration of that must be smooth and up to snuff from the beginning. It would be helpful if the Minister would say, for example, how many charities he thinks will use that and what the capacity of the Charity Commission will be.

Martin Horwood: I am grateful to the hon. Lady for her remarks on clause 55. I guess that we might be able to discuss that as a stand part amendment and therefore we may return to it. In the meantime, it would be useful to distinguish between the holders of the certificate and all the trustees of the charity. I am not sure that the two are necessarily the same and that every change of trustee would have to be notified in those circumstances. Would she, as I would, welcome the Minister clarifying that when he comes to make his remarks?

Helen Goodman: Yes. My understanding is that they were one and the same. I am sure that the Minister will be able to explain if that is not correct.
The other point that we need some clarity on is the speed of turnaround on those public collection certificates. It is important that that is a speedy process. The reason that this needs to be effective and not to have teething troubles from the beginning is that, as all hon. Members will be aware, many voluntary organisations run on tight margins. If, due to this system not working, their fundraising is messed up for three or six months, some of them could go under. That would be unfortunate and not at all our intention in passing the legislation.

Joan Humble: Order. May I point out to the hon. Lady that she is discussing matters that could properly be debated under a stand part debate under clause 55? By debating those matters now, she may be denying herself—and other hon. Members who may wish to comment—the opportunity to do that in a stand part debate on that particular aspect of the matter.

Helen Goodman: Thank you, Mrs. Humble. I will not say anything about my amendment No.139 because the hon. Member for Cheltenham (Martin Horwood) has more than adequately exposed all the matters on that. However, I look forward to hearing from the Minister on that point.
Turning to amendments Nos. 142 and 141, I had in mind the same situation described by the hon. Member for Cheltenham. As well as Christian Aid, I am aware that Amnesty International follows a similar process. They send out packs to their supporters and give them rules as to the way in which the collection should be conducted. The supporter then collects the money and sends it back.
There is concern about clause 53(1)(h)(i) and (2)(b)(i). We should put obligations on voluntary sector organisations only if they can carry them out, and it is unrealistic to think that a large organisation can check all the people who support it. Clause 53(1)(h)(i) is backward looking, so the commission might be able to prevent somebody who had caused a problem in the past from collecting again. Paragraph (b)(i), however, is forward looking, and that is totally unrealistic. No organisation can simply rely on its existing supporters and collectors, and it must always be looking for new ones. That is why I am also concerned about the forward-looking due diligence provision.

Edward Miliband: We have not heard from the hon. Member for Isle of Wight, who is normally a voice of reason on such matters. However, the amendments are important, although I shall try to deal with them briefly because we have already been discussing them for half an hour.
The overall point that I should make relates to public confidence. We are attempting to strike the right balance by ensuring that there is sufficient regulation of public collections—so that there is public confidence in the fact that charities are raising money in a legitimate way for legitimate purposes—but that such regulation does not, as the hon. Member for Cheltenham and my hon. Friend the Member for Bishop Auckland said, place undue burdens on charities.
Amendments Nos. 146 and 147, which stand in the name of the hon. Member for Cheltenham, meet the criteria of the aforementioned Cheltenham principle and are unnecessary. Amendment No. 146 would add the words
“although not in a form that might reasonably discourage legitimate applications”
and, to be honest, it is not one of the hon. Gentleman’s best efforts. The commission clearly will not want to discourage legitimate applications. It is committed to making the application process as straightforward and as easy to use as possible. It intends to publish accessible and readily understandable guidance to explain its approach to issuing certificates. That is clearly a new responsibility for the commission and it will be a big test for it as a modern regulator. The commission will want to carry out that responsibility in a way that helps charities to go about their purposes. The amendment is therefore unnecessary.
Amendment No. 147 makes a more important point, which it is worth explaining. The part of clause 52 to which the amendment relates allows the commission to attach conditions to any public collection certificate that it issues. That might sound as if it will be onerous for the charity and to the detriment of collection, but it might in fact facilitate the making of collections. The ability to attach conditions will enable the commission to issue a certificate where it might otherwise have to refuse one—for example, if applicants have been unable to supply all the information required. The commission might issue a collection certificate, but with the requirement that the information that has not been provided is quickly forthcoming. If that part of the clause did not exist, the commission might need to refuse a certificate.

Martin Horwood: The Minister may be misunderstanding my amendment. There is no intention to delete the clause, and I am quite content for the kind of conditions that he is describing to apply. I simply want to add to the Bill so that it states that conditions should not be in a form that might reasonably discourage legitimate applications, even inadvertently. I want that clear direction to be given to the commission.

Edward Miliband: The hon. Gentleman makes a fair point, but I am trying to explain the purpose of issuing conditions in order to correct the impression that this is about a horrible beastly commission imposing lots of horrible beastly conditions on nice saintly charities. That is the impression that he has given. Having said that, if the charity was under investigation, the commission might need to ask for a certificate of accounts in relation to the collection in order to understand the nature of the collection that took place. The amendment is unnecessary. The commission will not want to attach conditions in a form that might reasonably discourage applications. I hope that the hon. Gentleman will withdraw the amendment.
Amendments Nos. 139 and 148, tabled by my hon. Friend the Member for Bishop Auckland and by the hon. Member for Cheltenham respectively, concern the power of the commission in clause 53(1)(e) to make a judgment about the amount likely to be applied for charitable purposes. Again, we are talking about public confidence. It might interest the Committee to know that this power already exists under the House to House Collections Act 1939 and lies with local authorities, which have to make a judgment about whether the amount likely to be applied will be adequate or inadequate. We believe that it is not correct for local authorities to have that in their powers; it is not a matter for them.
Why is this provision necessary? Let me give an example that might help the Committee. It relates to an investigation conducted by the commission in 2001 concerning the Renal Care and Research Association Ltd. It was found that although that organisation had raised more than £1 million, only £74,000 was paid in the form of grants to kidney research bodies—only 7 per cent. of the total funds raised. If the commission encountered an organisation with such a track record, it would be advisable for it to be able to think about refusing a certificate, on the grounds either of excessive remuneration or of insufficient return to the charity. Obviously, the provision has to be applied with a light touch and I am pretty confident that it will be, but not to have this function, which already exists, would take away from the commission the power to uphold public confidence. The amount of money that is used for charitable purposes relative to the amount that comes in from fundraising is an issue, so it is right to have the function.

Martin Horwood: There are a number of problems with what the Minister is describing. First, it is difficult to discuss the renal charity, as we are not really aware of the facts of the case, but if I am right it applies to much more than public charitable collections. It seems to refer to the proportion of its funds that it applied to the specific function of renal research or whatever it was, whereas the clause refers to
“charitable, benevolent or philanthropic purposes”.
That can include non-research. Virtually all the activities of a charity, apart from occasional trading activities, must be charitable by law. Any money that goes to the charity is, almost by definition, “charitable, benevolent or philanthropic”.
The only circumstance when the clause might apply is when some moneys are taken out of the process of collection and given to some other purpose, not to the charity itself. The obvious one is remuneration but, as I keep saying and the Minister mentioned it again, that is dealt with in the subsequent subsection. So what is the mystery cost that is being taken out in the clause? What are the circumstances in which moneys might be mysteriously extracted from the collection and given to a non-charitable purpose?

Edward Miliband: I think the hon. Gentleman is slightly confused because the phrase,
“charitable, philanthropic or benevolent purposes”,
is not about a charity itself. It is about charities and non-charities—that is, those with “philanthropic and benevolent purposes” will be able to apply for a public collections certificate. That is the marginal point and I want to address the substantive point.
There are other costs as opposed to the costs of paying a fundraiser. For example, expenses might be payable to volunteer fundraisers, for fundraising materials, or for transport costs associated with the process of fundraising. Other costs might apply outside the specific issue of the costs of the fundraiser.

Andrew Turner: One reason I did not speak earlier was that I wanted to hear the Minister’s explanation and, frankly, I do not think it was very good. Money that is spent on flags, collecting tins, transport or expenses for volunteers is just as much charitable as money spent on fundraisers. That is what the NSPCC told me when I asked how much it spends on fundraising. If it were not charitable, it would unlawful to collect at all because all the proceeds of a charitable collection, by its nature, must be given to the charity or the charity is barred from undertaking the collection by virtue of its objectives.

Edward Miliband: I do not think the hon. Gentleman is right. My understanding of
“it appears to the Commission that the amount likely to be applied for charitable, benevolent or philanthropic purposes in consequence of the proposed collections”
is that it does not apply to the costs of fundraising materials, fundraisers, expenses payable to volunteer fundraisers, transport costs and so on.

Martin Horwood: I am certain that the Minister is wrong. I have been a director of fundraising and I believe that all my activities were charitable because I could not have been employed by a charity to carry out those activities otherwise. The payment of expenses to volunteers and all the costs he regards as legitimate if they are paid by the charity are bound to be charitable. Again, I ask him: what are the mystery costs, apart from remuneration which is dealt with in the next clause, that would be taken out of the charitable collection itself? That is the only circumstance in which the provision could possibly apply.

Edward Miliband: There are two possible reasons for objecting to this paragraph. One is that the costs that I described could properly be regarded as charitable, which is the point made by the hon. Member for Isle of Wight and half of the point made by the hon. Member for Cheltenham. The other is that the costs are somehow described fully in paragraph (f).
I am convinced that I am right about this and that the costs that I described do not fall under the provision in paragraph (e) which refers to
“charitable, benevolent or philanthropic purposes in consequence of the proposed collection”—
Martin Horwoodindicated dissent.

Edward Miliband: The hon. Gentleman shakes his head, but I think he is wrong. If I am right—I think the Committee will have to take my word on this—is there an issue here?
Let us suppose that there was a collection for an earthquake in Iran, and £100 was raised, of which £10 went to help with the earthquake victims and £90 went to the charity for its expenses and associated costs; are we really saying that in such a scenario £100 would be considered to have been applied for charitable, benevolent or philanthropic purposes in consequence of the proposed collections, and that this part of the clause is therefore unnecessary? I contend that that would be the wrong position to take.

Martin Horwood: The Minister is wrong on two counts. First, when the £100 is received, it is not then divided between expenses and charitable purposes. Even if his narrow interpretation of charitable purpose is correct, the money is inevitably given to the whole charity. It is never divided in the way that he describes, but becomes part of the whole charitable income of the charity, which is then divided between fundraising expenses and direct charitable purposes according to the SORP regulations.

Andrew Turner: SORP is guidance.

Martin Horwood: I am corrected by the hon. Gentleman. The expenses and expenditure of a charity is then divided. At no stage would the pennies given into a collecting tin or the income from a standing order be divided in the way that the Minister describes. That simply does not happen. All the proceeds from such collections go to the whole charity.

Joan Humble: Order. Again, I remind the hon. Gentleman and other hon. Members that interventions should be brief.

Edward Miliband: I am sorry that we did not get to hear the hon. Gentleman’s second point. We will have to agree to disagree on this. However, unusually for him, he is not living in the real world on this point. The real world concern is that if money is raised for a particular appeal, a significant proportion of that money should go towards—
Martin Horwoodrose—

Edward Miliband: If the hon. Gentleman listens for a minute, he can then intervene. He should have a bit of patience. People think that we should be assured that a significant proportion of money raised will go to the relevant appeal. That is the long and short of this part of the clause. The hon. Gentleman may claim and believe, with his wisdom and expertise as a former “Ã1/4berchugger”, that his understanding of the clause is far better than that of the Government’s whole legal team, but we believe that he is wrong on this. However, I give way to him again.

Martin Horwood: I shall attempt to be brief. For the record, I have never done chugging, and I have lived in precisely that real world for 20 years, and venture to suggest that I may well know more about it than the Government’s legal team.
The second point that I was going to make is relevant. Even with the ratios that the Minister describes being applied to the direct charitable purpose, it still might be worth the charity recruiting that donor, because, over time, as the Henley Centre figures suggest, that donor might be worth hundreds of pounds more. They might ultimately leave a legacy and be worth thousands, or even hundreds of thousands, of pounds to that charity. That brings me to a point that I made earlier about the Charity Commission’s inability to judge what is adequate and what is likely income.

Edward Miliband: The hon. Gentleman has moved partially back to the real world with that intervention. He asks how the Charity Commission will judge what is inadequate. Obviously, it would consult fundraisers and charities to establish a benchmark, but it is important to note—this might reassure the Committee—that the commission would not refuse a certificate for a first collection where the applicant has no track record. The point of the measure is precisely to ensure that, in cases in which there is a track record of large sums being raised but not being put to the specific purposes for which they were raised, the Charity Commission should be able to make a judgment. The power exists in legislation; it is a power of local authorities. It is rarely used in the particular ways that I have talked about and I suspect that it will be rarely used in the future, but it is an important power for the commission to have.
That brings me to amendment No. 142, tabled by my hon. Friend the Member for Bishop Auckland, concerning the question of a fit and proper person and
“any person authorised by him”.
Her concern is about the possible constraints that could be placed on legitimate fundraising. I want to offer her some reassurance, because it is necessary that a fit-and-proper-person test exists. This next point might be of interest to the Committee. The need for there to be due diligence to ensure that the fit-and-proper-person test is passed already exists in legislation—in the House to House CollectionsAct 1939.
Again, I think that there is a public confidence issue. I do not think anyone is saying that Christian Aid, with its 250,000 collectors, must undertake high-level scrutiny of every collector, but there may be some basic requirements that it is worth ensuring are made. One such example might be that a collector signs an undertaking that they have no unspent conviction; it might be something very basic. I need to reassure the Committee that I do not think that this will be an onerous or arduous set of requirements, but it is important to have them in place.

Helen Goodman: Is the Minister suggesting that, as part of the due diligence test, all collectors should sign a form saying that they do not have any kind of unspent conviction? I thought that one thing we were trying to do was to rehabilitate offenders and help people who have had difficult lives, and that one of the routes for doing that was through the voluntary sector. I hope that he is not, inadvertently, imposing a new condition.

Edward Miliband: I definitely do not want to impose conditions and it would not be for me to do so. The Institute of Fundraising has guidelines on what a test of being fit and proper should be for collectors, and we can rely on it to offer us a way forward on this. I do not think that there is an issue in this regard.
That takes me on to my hon. Friend’s worry about clause 53(2)(b)(i), which relates to the due diligence test overall. I may have not completely understood what she was concerned about, but her amendment would remove the fit-and-proper-person test completely. I am happy to give way to her if she would like to be more specific.

Helen Goodman: What would an organisation such as Christian Aid, which as the Minister says has 250,000 collectors, have to do? When he has explained that, we may be in a better position to judge the reasonableness of what it has to do.

Edward Miliband: As I say, the judgment will have to be made in consultation with the Institute of Fundraising and others. The issue is not about imposing large obligations on lots of different collectors. I want to reassure my hon. Friend about that. The risk is not necessarily associated with the largest organisations, but if there is not a fit-and-proper-person test in the Bill, we will be left open to the charge of undermining public confidence in charitable collections. I shall be happy to have the Charity Commission circulate to Committee members before Report a sense of how it intends to apply the test. I hope that that reassures Committee members.
On amendment No. 138, tabled by my hon. Friend, I am sympathetic to the idea that we must find a way to ensure that the process of applying for the public collection certificate—I said it was a test of the commission—is non-bureaucratic. The problem with the amendment is that registration happens only at the point of formation of the charity. She suggests combining registration and application, but I am not sure that registration is the answer.
My other point to my hon. Friend, which answers a question that she posed to me, is that in the regulatory impact assessment, 8 to 10 per cent. of charities were estimated as likely to apply for public collection certificates. The problem with combining an annual process with registration for a public collection certificate is twofold: first, only a small proportion of charities may want to apply for them, so the danger is that we will lengthen the form for all charities, even though only a minority will apply for the certificate; and secondly, the certificate is issued for five years rather than one. My hon. Friend shakes her head, and I am happy to give way to her.

Helen Goodman: I know that that is the formal position, but is the public collection certificate held by the organisation or by the trustees? Although the Bill says that the certificate should last for five years, the Minister will find that if the certificate is held by the trustees, they will have to go through the whole process set out in clause 55.

Edward Miliband: In the case of an incorporated charity, the certificate is held by the charity as a corporate body; in the case of unincorporated charities, it is held by an individual trustee, a number of trustees, or, if there is a fundraising director, by the fundraising director. Clause 55, which we may come to, exists precisely to provide an easier method of transferring the certificate. We must face up to the fact that there is an issue with unincorporated charities. The fact that they have to re-register their trustees each year if their trustees change is precisely a facet of the constitutional nature of unincorporated charities.
My hon. Friend has raised an important issue, but it is not one of deep principle. I undertake to talk to the Charity Commission about how best it can come up with a non-bureaucratic process. If it can be combined with an annual process, it should be, although I have raised some doubts about why that may not be possible. I understand that the form will be downloadable from the commission’s website. The general issues that my hon. Friend has raised are completely right.
Finally, I want to go back to the hon. Member for Cheltenham and his concerns about the Attorney-General. Amendment No. 149 would affect a traditional and rather underused role—I do not think it should worry the Committee—of the Attorney-General as friend of the court and protector under the Crown of charities. It would be possible to remove that right from the Attorney-General, but I do not think that it would be desirable. The power will be used extremely rarely, but it is sensible to leave it in the legislation.

Martin Horwood: As regards a number of the amendments, the Minister has made reassuring statements about the intent of the Charity Commission and of the Bill. I suppose we will have to trust his good and generous soul and the practice of the Charity Commission. I hope that the practice follows the theory that he has set out. The proof of the pudding will be in the eating, and we shall have to review that in due course. On those grounds, I might seek leave to withdraw amendment No. 146 and I would be content to see others not pressed.
Amendment No. 38, tabled by the hon. Member for Bishop Auckland, sets out a legitimate, and cost and regulation-saving, process.

Helen Goodman: I am grateful for the kind words from the hon. Gentleman. I think that the Minister was saying that the amendment was technically defective because I had confused the registration process with the annual return process. Had I written in the annual return process, I think that it would have been a better amendment.

Martin Horwood: I am sure that the hon. Lady is absolutely correct, and so I am reassured on that front, too. It would be the wish of the whole Committee to see the Minister address the issue of combining the annual return with the application for a certificate. The fact that the time scales might be slightly different does not rule out the possibility of combining the two on one form. It simply would not be necessary for people to fill in both parts on every occasion.
On amendment No. 148, which is similar to amendment No. 139, my concerns are still there and nothing that the Minister has said has reassured me that he is being advised about the real world. The impossibility of the commission being able to judge what is adequate has been almost underlined by the fact that he made comments about a ratio of income to expenditure that would be perfectly legitimate if it was justified by the future income.
The Minister is looking disparagingly at his notes, but public collection certificates will apply to standing orders. The standing order might be for as little as two or three pounds a month. At the point of solicitation, it is quite clear that if a paid fundraiser was involved, the costs would vastly outweigh the income or the amount being applied to the charitable purposes of the charity. Over time, that amount would build up, which is why standing orders are a popular form of fundraising, and would give the donor the opportunity to give more and to give to emergency appeals. The Minister shakes his head, but I invite him to tell me where I am going wrong with that scenario.
I have had responsibility for tens of millions of pounds of charity income that was derived from precisely that source. Those regular standing orders build up over time and form an enormously valuable and cost-effective source of income for major and smaller charities. Sometimes they can lead to legacies worth hundreds of thousands of pounds—and occasionally millions of pounds—that can make the recruitment of a donor to a good cause an extremely worthwhile process, even if at the very moment of solicitation the ratio does not appear to be very beneficial for the charitable purpose. That is a difficult judgment call for even professional fundraisers to make. One must take into account all sorts of aspects, such as what used to be called in the jargon the attrition rate—that is, the likelihood of donors falling out of the standing order relationship at a future date. Those rates and ratios change from year to year, as the nature of fundraising and the popularity of different fundraising methods change.
It is incredibly difficult to see how the commission could ever have the expertise to judge what an adequate application of the funds to a charitable purpose was or what the likely amount of the proceeds from a collection would be, because those are difficult enough for the fundraisers to judge themselves. For the commission to have the right to refuse an organisation a certificate on that basis seems a dangerous step. I support amendment No. 139, which stands in the name of the hon. Member for Bishop Auckland and I should like to press amendment No. 148 to a Division should the opportunity arise.
On amendment No. 149, which stands in my name, the Minister has explained that the Attorney-General will be acting in the traditional role of protector of charities. All I can say is that charities are lucky to have so many protectors in the Bill. It seems a strange argument to say that we should support the clause on the grounds that it will almost never be used; nevertheless, I bow to the Minister’s greater legal expertise. I shall not press amendment No. 149 to a Division but, bearing in mind my remarks about amendment No. 148, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 51 ordered to stand part of the Bill.

Clause 52 ordered to stand part of the Bill.

Clause 53

Grounds for refusing to issue a certificate

Amendment proposed: No. 148, page 59, line 23, leave out from ‘inadequate,’ to end of line 24 and insert
‘having regard to all circumstances.’.—[Martin Horwood.]

Question put, That the amendment be made:—

The Committee divided: Ayes 4, Noes 10.

Question accordingly negatived.

Clause 53 ordered to stand part of the Bill.

Clauses 54 to 59 ordered to stand part of the Bill.

Clause 60

Refusal of permits

Question proposed, That the clause stand part of the Bill.

Helen Goodman: I know that my amendment No. 143 has not been put on the selection list, but I wonder whether the Minister could clarify how clause 60 will work. Professional fundraisers are concerned that, because it is so tightly drafted, from time to time in some places, it would be possible for a local authority to restrict fundraising to two days a week. Is he aware of that, and could he and the lawyers examine the technical drafting of the clause before it comes back on Report?

Joan Humble: Before I call the Minister, could I point out to the hon. Lady that her amendment was grouped with amendment No. 144? As we have had the debate on the amendment, I would ask the Minister to respond to the clause stand part debate.

Edward Miliband: I will be brief. My hon. Friend was lucky enough to be let off at 6 o’clock on Tuesday. She will see from the record that I spoke in some detail about the issue, but I would be happy to discuss it with her outside the Committee.

Question put and agreed to.

Clause 60 ordered to stand part of the Bill.

Clauses 61 and 62 ordered to stand part of the Bill.

Clause 63

Regulations

Martin Horwood: I beg to move amendmentNo. 153, page 69, line 5, leave out ‘or (3)’.

Joan Humble: With this it will be convenient to discuss amendment No. 154, page 69, line 5, leave out ‘or (b)’.

Martin Horwood: Amendment No. 153 is consequential on amendment No. 154, which seeks to leave out the words “or (b)” that refer to subsection (1)(b), which deals with regulations that the Secretary of State may make
“for the purpose of regulating the conduct of public charitable collections”.
We do not seek to delete the paragraph—it is an important part of the structure of the clause as a whole—but we seek to remove the reference in subsection (4) to its generality not being restricted by anything else in the clause. In effect, the amendment would restrict the power of the Secretary of State to make regulations willy-nilly in whatever way he chose.
Although we trust that the Secretary of State and his parliamentary colleagues are generous souls, it seems that subsections (2) and (3) set out a comprehensive and legitimate list of the matters that may be prescribed by regulation, and the provisions that may be made. They refer to such sensible things as the areas in which the appeal can be conducted, the keeping of accounts and the prevention of annoyance to the public. I question whether the Secretary of State needs much wider powers, as granting them makes almost superfluous the powers granted in subsections (2) and (3).

Edward Miliband: Believe it or not, Donald Rumsfeld is able to help us. He talked a few years ago about known unknowns. He said that we know that there are some things that we do not know. The hon. Member for Cheltenham asks a legitimate question. He wants to know what it is that might not be contained in subsections (2) or (3) for which the Secretary of State would want to prescribe regulations. The truth is that we do not know. If we knew, it would be included. The question is therefore why we need the power.
The hon. Gentleman was formerly involved in the process of public fundraising, if not as an “Ã1/4berchugger” as I alleged earlier. He will know that we need the power because the way in which public fundraising takes place is rapidly changing. For instance, direct debit fundraising essentially did not exist 10 years ago. The only reason for these provisions is that they provide for flexibility in the prescribed regulations, so that if the process of public fundraising changes and it is thought to be necessary to take action in order to preserve public confidence on matters that fall outside subsections (2) and (3), we will have the flexibility to do so without recourse to primary legislation.
As I say, I cannot describe the ways in which public fundraising might evolve, or what regulations might be necessary; if I could, they would be defined in subsections (2) and (3). I know that that makes life rather difficult, but even if my observations included mention of Donald Rumsfeld, I hope that the hon. Gentleman will withdraw the amendment.

Martin Horwood: I cannot help thinking that hon. Members and those in another place may have enormous fun reconstructing the Minister’s suggestion that known unknowns should be the proper basis for legislation, and citing Donald Rumsfeld as an authority. He might find that lawyers will challenge the idea that it is a proper basis for legislation. I certainly would. However, I am somewhat reassured that his intent is benign.
Although the Minister’s reference to fundraising being a fast-moving discipline is right, public charitable collections are probably the least fast moving of all. The way in which fundraising is done—whether with cash, direct debits or standing orders—may have evolved over the past 10 or 15 years, but the nature of public collection itself has hardly changed in 100 years. Nevertheless, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 63 ordered to stand part of the Bill.

Clauses 64 to 66 ordered to stand part of the Bill.

Joan Humble: Opposition Front Benchers have said that they would find it convenient to combine the debates on clauses 67 and 68 and the amendments to them accordingly.

Clause 67

Statements indicating benefits for charitable institutions and fund-raisers

Andrew Turner: I beg to move amendment No. 128, page 71, line 14, at end insert—
‘(6) After subsection (9) insert—
“The Charity Commission shall have power to initiate criminal proceedings in respect of offences under subsection (9).” ’.

Joan Humble: With this it will be convenient to discuss the following: Clause stand part.
Amendment No. 131, in clause 68, page 73, line 22, at end add—
“60C Fundraising by sale of products and services
(1) Save in the case of small outlets, where the sale of any goods or service is represented as benefiting a charity or charities, the vendor shall indicate either the proportion or the amount of the sale price which will be passed to the charity or charities for their unrestricted benefit.
(2) Indications under subsection (1) above may be made in diagramatic form, and shall be made in writing, the font-size of which shall be no smaller than the price of the goods or service.
(3) For the purpose of this section, a “small outlet” is an organisation which is not obliged to register for Value Added Tax purposes.”.’.
Clause 68 stand part.

Andrew Turner: When we arrived this morning, it was fair to say that the sun had got his hat on and we all hoped that later on we could come out to play. The sun has, I am afraid, taken his hat off and hidden behind a cloud. Let us hope that he comes out again later. It is pleasing to see you, Mrs. Humble, once more in your place, if only for a few more minutes.
I am grateful that the two clauses have been brought together because that will make for a shorter debate. I give notice that I might wish to press amendment No. 131 to a Division.
Amendment No. 128 gives the Charity Commission the power to initiate criminal proceedings in respect of offences under subsection (9). The reason for that is that in the past—there are a number of specialised offences here—the Charity Commission has had the power to take action against charities. However, it was not necessarily the charities who were offending. Sometimes an organisation that is not a charity purports to be one. The provision would give the Charity Commission the power to enforce criminal sanctions in respect of clause 60 of the Bill. That may not be the most appropriate body for the task; it might be appropriate for sanctions to be enforced by trading standards or a similar organisation. That is by nature of a probing amendment and I will welcome the Minister’s view on that.
Amendment No. 131 is a requirement for information to be given, when goods or services are offered for sale purportedly for the benefit of a charity, about the amount of money that is going to that charity. It adds a new section 60C to the 1993 Act. It exempts small outlets. I can see the hon. Member for Bishop Auckland shaking her head. I am sure that we will have an interesting debate on that.
Christmas cards are one example of goods that are quite frequently offered for sale, supposedly for the benefit of charity. I refer to a 5 November report from The Guardian. It is relevant that it is Guy Fawkes night on this day of all days. Hon. Members might wish to consult the Guido Fawkes blog to find out more about why I have said that. However, The Guardian said:
“Britain’s high street retailers are selling charity Christmas cards which give as little as 4p in every £1 to good causes. A survey by Guardian Money reveals that John Lewis Partnership and Fenwick as the stores which give least, with one card on sale in Fenwick’s swanky Bond Street store”—
it has descended to the level of The Sun in that—
“giving just 1p to an arts fund...Card Aid...names John Lewis as ‘Scrooge of the year’. Clinton Cards topped the survey by promising to pass on 25 per cent. of the (pre-VAT) price on its charity cards.”
That is a matter of some concern. How much money from a service or a good that is offered for sale by a high street outlet—although not only a high street outlet and I have specifically exempted small outlets—goes to charity?
In 2004, the average charity Christmas card sold for 64p of which only 5p went to charity. Boots have a standard flat rate of 10p—

It being twenty-five minutes past Ten o’clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at One o’clock.